Unilever 2004 Annual Report Download - page 55

Structure
Unilever Group
NV and PLC are the two parent companies of the Unilever Group
of companies. They are separate companies, with separate stock
exchange listings and different shareholders. Shareholders cannot
convert or exchange the shares of one for shares of the other,
and the relative share prices on the various markets can, and do,
fluctuate. This happens for a number of reasons, including
changes in exchange rates. However, over time the prices of
NV and PLC shares do stay in close relation to each other, in
particular because of our arrangements to pay dividends on
an equalised basis.
NV was incorporated under the name Naamlooze Vennootschap
Margarine Unie in the Netherlands in 1927. PLC was incorporated
under the name Lever Brothers Limited in Great Britain in 1894.
Since 1930 when the Unilever Group was formed, NV and PLC,
together with their group companies, have operated, as nearly as
is practicable, as a single entity. They have the same Directors,
adopt the same accounting principles, and are linked by a series
of agreements. The Equalisation Agreement (see below), which
regulates the mutual rights of the two sets of shareholders, is
particularly important.
NV and PLC are holding and service companies. Our businesses
are carried out by our group companies around the world. The
holding companies have agreed to co-operate in all areas and to
ensure all group companies act accordingly. Usually, shares in the
group companies are held ultimately by either NV or PLC, with
the main exceptions being that the US companies are owned by
both and, as a result of the legal integration of Bestfoods into
Unilever, a number of the group companies are partly held by
Unilever United States, Inc. These group companies are therefore
also ultimately owned jointly by NV and PLC. See pages 165 to
168 for a listing of the Group’s principal subsidiaries.
Legal structure
NV shareholders
NV owned
companies
operating
companies
operating
companies
operating
Jointly owned PLC owned
NV Equalisation
agreements
and other
PLC
Directors
PLC shareholders
Business organisation
Our operations are currently organised into two global divisions –
Foods and Home and Personal Care – headed by Division
Directors. These have been supported by their Business
Presidents, responsible for the profitability of their regional or
global businesses. For details of the Business Presidents, see
page 69.
This divisional and regional structure has facilitated complete
alignment with the divisional objectives and strategy while
ensuring that close operational control is maintained within
regions which are largely homogenous.
In 2005 we will introduce a new, simpler structure that comprises
three Regions, Europe, The Americas and Asia/AMET, whose
managements will be responsible for our market operations, and
two category managements, Foods and Home and Personal Care,
responsible for innovation and category management. Our
objective is enhanced clarity of role and responsibility, whilst
retaining the advantages of control and alignment. The existing
Division and Business Group structures will disappear. The new
structure will be effective from April 2005.
Co-operation
Under Unilever’s constitutional arrangements, NV and PLC have
agreed to follow common policies, to exchange all relevant
business information, and to ensure that all group companies act
accordingly. They aim to co-operate in all areas, including in the
purchase of raw materials and the exchange and use of technical,
financial and commercial information, secret or patented
processes and trade marks.
These arrangements are designed to create a balance between
the funds generated by the NV and PLC parts of the Group for
the benefit of their respective sets of shareholders.
The Equalisation Agreement
The Equalisation Agreement makes the position of the
shareholders of both companies, as far as possible, the same as if
they held shares in a single company.
Under Article 2 of the Articles of Association of NV and Clause 3
of the Memorandum of Association of PLC, each company is
required to carry out the Equalisation Agreement with the other.
Both documents state that the Agreement cannot be changed or
terminated without the approval of shareholders (see page 59). In
addition, Article 3 of the PLC Articles of Association states that
PLC’s Board must carry out the Equalisation Agreement and that
the provisions of the Articles of Association are subject to it.
We are advised by counsel that these provisions oblige our Boards
to carry out the Equalisation Agreement, unless it is amended or
terminated with the approval of the shareholders of both
companies. If the Boards fail to enforce the Agreement,
shareholders can compel them to do so under Netherlands and
United Kingdom law.
52 Unilever Annual Report and Accounts 2004
Corporate governance